Wednesday, January 15, 2014

Lending Against Gold Jewellery

The Reserve Bank of India (RBI) has decided to raise Loan to Value ratio up to 75 percent for loans against the collateral of gold jewelry from the present limit of 60 percent with immediate effect. It is clarified that the value of the jewelry for the purpose of determining the maximum permissible loan amount will be only the intrinsic value of the gold content therein and no other cost elements should be added thereto. The intrinsic value will continue to be arrived at as detailed in ‘the circular’.

The last sentence in Paragraph (17B) shall be replaced with the following -

“The ownership verification need not necessarily be through original receipts for the jewellery pledged but a suitable document may be prepared to explain how the ownership was determined, particularly in each and every case where the gold jewellery pledged by a borrower at any one time or cumulatively on loan outstanding is more than 20 grams. NBFCs shall have an explicit policy in this regard as approved by the Board in their overall loan policy.”

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